When we see ‘Save our Pub’ protests is pretty much been exclusively for an outlet that has been there for many years but the trade has slowed up. This time it is unfortunately due to the opposite.
Much has changed in the world since we invested in to The Queens Head in Titchfield. Back then you could still smoke in pubs, no-one knew who Leona Lewis was and Pompey fans still liked Harry Redknapp. But unfortunately some things change, and not always for the better.
In the mid 2000’s pubs were still riding high, trade was good and financially the country wasn’t too screwed. The business model of a pub lease was still viable and seen as good security and when the option of taking over the local village pub came up it seemed like a gamble worth giving a go.
My family has a great set of credentials; Mums a trained chef, Dads a great restaurant host and fantastic with events, my brother had worked in the trade for a few years and was a natural behind the bar and I had a pretty strong catering CV. Couple that family spirit with a village pub vibe and we thought we would be on to a winner.
The Queens Head had been pretty successful in recent times. But as the previous landlord was looking to sell the function room use was kept to a minimum, food was limited and he had kept his core of regulars happy. We saw the potential and paid a good going rate for the remaining length of his lease.
In business terms a lease is a pretty much ‘all in’ option. The only contact you have with the pub company is that you pay them rent and you call them each week with a beer order. Everything is your responsibility, building upkeep, book keeping, VAT/PAYE payments, repairs, decoration… the plus side of all this is they don’t really have a say in what you do there. If you want to be a sports bar, you can, if you want to be a strip club you can (well permits and local uproar permitting). It gives great flexibility and lets you decide what you think will work there and lets you benefit from that coming good.
For pub companies this was a great no hassle option. If the landlord messed up then they would have no money to pay the rent and the pub company takes it back off of them. The pubco resells it to the next guy. All they may lose is a few months’ rent but that could be made back by the lump sum income from them reselling it. Rent is pretty high and they also get a great income from making you buy their beer each week. Beer which they sell at a higher than the going rate too.
But fast forward to present day. November 2014 government saw tied pubs as getting a raw deal. Pub companies were forcing publicans to buy beer from them. Because of this they could charge what they saw fit. A barrel of lager for example was £157 from them but £90 from the local cash and carry, cheaper if you went in to a contract with a beer supplier.
On the face of it the government plan was a god-send to the publican and punters. To make a liveable mark up with tied prices, the prices had to be higher than the free-house next door. Now there would be fair competition and we could compete evenly. But then comes the bigger picture.
Pub companies soon had to accept that these new types of lease will mean halving (ish) their income from a pub. As a rough guide, QH’s rent was around £30k per year, as a quick guestimate we also fed around £28k in to the pot through the above mentioned £60 mark-up.
This meant a revamp of their business model.
News started to come out in business pages that Enterprise Inns would go down the managed house route. In November 2014 they had around 5000 pubs but only 14 managed houses. Industry magazines started touting stories that this number would increase to 840 by 2020 with 50 outlets transferring over to the managed model with in a year.
Maybe being stuck in the small village and being busy we didn’t put 2 and 2 together and realise what was happening outside of the PO14 area. Maybe not many publicans saw the negative side of this new law.
The trouble is these 826 pubs have to come from somewhere. It could be easily thought that any pub that struggled to keep a tenant or couldn’t make the money would be the first to go over to being managed. Enterprise Inns would put in their ‘Experts’ and gain control over the pubs to get them working. With a much more hands on approach they could make sure they worked, leaving the good pubs to continue to make them money.
Turns out it could be the opposite.
The lease we acquired in the early part of 2007 was due to run out in March 2015. During that time we were told that we were entitled to renew our current lease with the same terms, the only change Enterprise Inns would do was to add the compulsory ‘Brewlines’ monitoring system. But with 3 months to before the renewal date Enterprise Inns started to stutter.
In April 2015 the government were due to sit and decide on how and when the new free of ties laws would come into force. Enterprise Inns told us they wanted to find out what would happen in that debate to decide on what we could be offered. That date came and went and the law wasn’t finalised so they started to look at what they could do They were no longer sure they wanted to give such long leases (20years) and started to come up with other options; 5 year lease; 7 year lease; fully tied lease; free of tie lease…
A few meetings with the area manager, a few calls to the Bii, some legal advice later and we had offered to resign under the previous terms and also offered a reasonable rental amount to go to the new free of tie option. Nearly a month passed and Enterprise Inns finally got back to us saying that we were way off and the rental figure, it had to start with a 7. If that figure was to be worked too then we would have been worse off or we would have to have a sharp upturn in beer trade, tricky when you are already successful on the wet sales (£70k is £12k more than we currently pay for rent plus the beer mark-up). Before we could respond to this my parents got the call….
Enterprise Inns were not offering a new lease in any fashion. They were taking the pub back to make it a managed house. They had over the months of stalling, sent in mystery shoppers on multiple occasions and at various times of the day. Each one went back and reported that the pub was in a healthy state and that Enterprise Inns should reclaim it as one of their own. If that was not disappointing enough, heres what that also means financially…
A pub is usually worth an amount that factors 3 things in to consideration:
- The value of the lease.
- The fixtures and fittings.
- The ‘good will’.
The good will side is the key. You run a pub well, get a name in the community, get a good reputation, have a strong website, a good social media base etc. you can put a value on those intangible items.
My family have added value to that pub through hard work over what will be just shy of 10 years. The day we took over the pub we inherited just the one booking for a function, a bar that had a handful of regulars and a next to nothing food trade.
This year we have had sell out dinner dances and theatre performances and our New Year’s Eve Ball sold out back in August. There is value in that. The compensation that Enterprise Inns will pay is based on 1 cold hard figure, the rateable value.
I say one…I mean two. It’s the rateable value minus work they think needs to be carried out to bring the building up to standard. That figure is worked out by using the workmen the Enterprise Inns contract in, and not the price on the street.
For example, Enterprise Inns costed a PAT test (tests electrical items safety) for the pub to be £4000…we have paid around £250 each year we have been there. Along with over pricing jobs they have also been super fussy. The cellar door lock needs replacing as the push bolt that is on there now has holes next to it where a keyed lock used to be, they want the key lock put back, the nit-picking goes on. It seems that if they can make the dilapidations value as high as possible they can effectively just take the pub off of my family and pay zero compensation.
Being realistic the compensation that my parents could get from Enterprise could be as little as half to a third of what they could get if they sold the lease on the open market (going on a valuation figure we were given as a rough quote a couple of years ago).
That’s tens of thousands of pounds different. Those tens of thousands of pounds were what my parents hoped would be their pension and a reward to the decade of 7 day weeks, 80 hour working weeks and opening your home up to the general public.
As the opening sentence states ‘Save Our Pub’ doesn’t take on the usual meaning here, and for the next couple of years may take on a different meaning altogether. There is a perception among nearly all drinkers that managed houses are a soulless being.
The manager is never there for the long haul. If they do well at a pub, they move to a bigger pub. They don’t put the full effort in as they don’t have a financial interest in the place. They make sure they are busy enough to meet targets but not too busy that they will be given higher targets for next year.
I have just done a brief stint as an assistant in a managed house. Part of a management course I was sent on was how to make your staffing costs look good for head office; “understaff for 2 weeks, over staff for a week and use the 4th to balance the budget but don’t come under budget or you’ll get it cut for the following year”…just staff to what you need each week seems to make more logical sense.
The ‘pub’ we are fighting to save will now change from being the physical being of the building to the essence of the word ‘pub’. The Pub…a Landlord who is there for the long term, the staff you get to know and the personal touch that come from it, the warmth you get being welcomed into what is essentially their front room.
Over the years we have given meeting room space to all the local groups and clubs you can think of, village trusts, carnival organisers, council meetings etc as we see the value in becoming part of the community, you feel an area manager for a managed house would see that as revenue lost and start charging these people. The essence of a pub will be lost.
So this is a call to arms, but not to remind people to pop in the Queens Head and buy a pint, but to tell the larger corporations that the numbers they are pushing around are people’s lives and the buildings they are seeing as income generators are not just four walls and a roof but the homes of the landlords and families and the home of the social hub of a community.
This is a trial period for pub companies and I would guess we are unfortunate enough that our lease runs out during the period of uncertainty, few years back we may have had a renewal straight away and a few years’ time we would have seen this coming.
As it stands my parents have been given a date next March to be out by, if they are there a minute longer they have been told there are trespassing and will be prosecuted.
I hope the petitions and social media support (please see links below) help us get a fair crack of the whip, either a rethink (termination of lease still hasn’t been given in written form) or at least a fair price to leave.
I also hope it will help a fellow publican get a heads up about the current state of play with in the industry.
You used to worry your livelihood would be taken away if you weren’t very good, now you should be worried if you are running the pub successfully
Here are a few helpful links:
Some industry related news and further reading can be found here: